Valuation of fundamental analysis reliability in stock pricing: theoretical approach

Abstract

Fundamental analysis together with technical analysis is used by investors as a main tool allowing pricing stocks and making investment decisions. Recent studies show that under the conditions of today financial market and irrational investors acting, the results of fundamental analysis not always reflect real market prices. However, applicability of fundamental analysis is still very wide. After brief introduction of fundamental analysis key points, authors of the paper aim to find out, whether the efficient applicability of fundamental analysis is reasonably doubt. In order to solve the problem of fundamental analysis reliability, efficient market hypothesis supporters critique against fundamental analysis is provided and overview key points of its unreliability. Authors conclude that despite all reasonable arguments against fundamental analysis, the application of this tool could be successful in stock pricing in order to make long-term investment decisions.